GSK cost-cutting drives Q2 profit

LONDON (AP) — A big reduction in administrative costs and strong sales in Japan helped GlaxoSmithKline PLC return to profit in the second quarter of the year.

The pharmaceutical company reported Tuesday a profit of 1.1 billion pounds ($1.8 billion) in the second quarter, in contrast to last year's loss of 304 million pounds.

GSK achieved the result despite a 4 percent drop in revenue to 6.7 billion pounds, largely because sales and administration costs were slashed from 4.2 billion pounds last year to 2.3 billion pounds.

The company's shares were little changed at 1,364 pence ($22.37) on the London Stock Exchange following the report.

Underlying sales were up 5 percent, led by a 20 percent gain in Japan. These figures exclude sales of Avandia for diabetes, which has been hit by regulatory restrictions, the Valtrex herpes medication, which faces generic competition, and sales of pandemic flu virus vaccines, which were a big seller last year but have no demand this year.

Underlying sales outside Europe and the United States now account for 37 percent of GSK's volume, with a growth of 15 percent in the second quarter, the company said.

For the first six months, profit more than doubled from 1.04 billion pounds last year to 2.6 billion pounds this year. Restructuring costs fell from 654 million pounds in the first half of last year to a 275 million pounds this year.

"Our ongoing restructuring program is near to completion but with savings delivery higher than originally forecast," to a total of 2.5 billion pounds per year by 2012, said Chief Executive Andrew Witty.